Brink v. First Credit Resources, Civ-97-1261-PHX-ROS.

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
Citation57 F.Supp.2d 848
Docket NumberNo. Civ-97-1261-PHX-ROS.,Civ-97-1261-PHX-ROS.
PartiesHarry W. BRINK, on behalf of himself and all others similarly situated, Plaintiff, v. FIRST CREDIT RESOURCES, Defendant.
Decision Date12 July 1999

Michael Carey Shaw, Law Offices of Bybee & Shaw, Tempe, AZ, Floyd Bybee, Bybee & Shaw, Tempe, AZ, O. Randolph Bragg, Horwitz, Horwitz & Associates, Ltd., Chicago, IL, for Harry W Brink, on behalf of himself and all others similarly situated, plaintiff.

Robert E Boyle, Robert E Boyle & Associates PA, Bloomington, MN, for First Credit Resources, defendant.


SILVER, District Judge.

On October 21, 1998, Plaintiff filed a Motion for Leave to File an Amended Complaint. Defendant filed a timely motion in opposition. For the following reasons, Plaintiff's Motion will be granted.


Plaintiff Harry W. Brink commenced this action on June 12, 1997 in response to a letter, (attached to Compl. as Ex. A), Plaintiff received from Defendant First Credit Resources International, Inc. ("First Credit"). (Compl. ¶ 6.) Plaintiff alleges that by sending this letter First Credit violated provisions of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, by attempting to collect on a time-barred debt. (Compl. ¶ 8.)

Plaintiff has filed a Motion for Leave to File an Amended Complaint pursuant to Fed.R.Civ.P. 15. He seeks to correct the name of Defendant from "First Credit Resources" to "First Credit Resources International, Inc." (Am.Compl.¶¶ 1, 4.) Plaintiff also seeks to add Dr. M. Reza Fayazi and Ms. Laura Merkwan, the president and vice president of First Credit, as defendants.1 First Credit does not oppose the correction of Defendant's name in the Amended Complaint. Therefore, leave to amend the name of Defendant First Credit will be granted. However, First Credit opposes the addition of Fayazi and Merkwan as defendants.2


Fed.R.Civ.P. 15 governs the amendment of pleadings. The Rule states that, after a responsive pleading has been filed, "a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). The factors considered in determining whether a motion for leave to amend should be granted are undue delay, bad faith, prejudice to the opposing party, whether the party has previously amended his pleadings, and futility of amendment. Bonin v. Calderon 59 F.3d 815 (9th Cir.1995), cert. denied, 516 U.S. 1051, 116 S.Ct. 718, 133 L.Ed.2d 671 (1996). First Credit argues that the amendment is futile because the claims against the proposed new defendants are time-barred, the Court lacks jurisdiction over them, and they cannot be "debt collectors" under the statute.

I. Should the Motion for Leave to Amend be denied because the claims against the proposed new defendants are time-barred?

Plaintiff seeks to add allegations that Fayazi and Merkwan violated provisions of the FDCPA by approving, authorizing, or participating in sending the alleged collection letter at issue. An action pursuant to the FDCPA must be brought within one year of the date on which the violation occurred. 15 U.S.C. § 1692k(d). For purposes of collection letters, the date of violation is the date the letter is mailed. Naas v. Stolman, 130 F.3d 892, 893 (9th Cir.1997) (citing Mattson v. U.S. West Communications, 967 F.2d 259, 261 (8th Cir.1992)). The date the letter is mailed is the last opportunity for the author to comply with the FDCPA and is "fixed by objective and visible standards." Id.

A. Is the Time Limitation in the FDCPA a Statute of Repose?

There is no dispute that the letter Plaintiff received was mailed April 29, 1997. Plaintiff filed the Motion for Leave to Amend in October of 1998, more than one year after this mailing date. Thus, the Amended Complaint is timely only if the claims against the new defendants relate back to the original complaint pursuant to Fed.R.Civ.P. 15(c).

First Credit argues that the one-year limit on maintaining an action pursuant to the FDCPA is a statute of repose rather than a statute of limitations, and thus the relation back provision does not apply. For support, First Credit cites Resolution Trust Corp. v. Olson, 768 F.Supp. 283 (D.Ariz.1991). In Resolution Trust, a conservator for a savings and loan association attempted to collect from the guarantor of a loan for the amount of the loan still owed after the sale of the underlying property. The applicable statute in Resolution Trust, A.R.S. § 33-814(D), however, is substantially different from the FDCPA in two important ways. First, A.R.S. § 33-814(D) creates a substantive right, providing, in part, "if no action is maintained for a deficiency judgment within the time period prescribed ... the proceeds of the sale are deemed to be in full satisfaction of the obligation and no right to recover a deficiency in any action shall exist." Id. at 284. In other words, the statute expressly gives the guarantor a right of repose after the three month period prescribed. A.R.S. § 33-814(A), (B). This time period defines the rights of the parties, so the statute is more substantive than procedural in nature. Id. at 285. In contrast, the FDCPA provides "[a]n action to enforce any liability ... may be brought ... within one year from the date on which the violation occurs." 15 U.S.C. § 1692k(d). The language of the FDCPA merely limits the time in which a plaintiff may seek enforcement; it does not create a right in the purported violator. Because the FDCPA's limit is procedural rather than substantive in nature, it is a statute of limitation.

The second difference is that the applicable statute in Resolution Trust is a state statute creating a substantive right which cannot be "abridge [d]" by a Federal Rule of Civil Procedure. 28 U.S.C. § 2072 (Rules Enabling Act). Because the FDCPA is a federal statute, applying Fed. R.Civ.P. 15 in the instant case does not abridge a state substantive right, and thus the relation back provision of Rule 15(c) may be applied.

B. Do the Claims Relate Back?

Alternatively, First Credit argues that, even if Rule 15 is applicable, Plaintiff's amendment is futile because the claims do not relate back to the date of the original Complaint. Fed R.Civ.P. 15(c) provides:

An amendment of a pleading relates back to the date of the original pleading when ...

(3) the amendment changes the party or the naming of the party against whom a claim is asserted if ..., within the period provided by Rule 4(m) for service of the summons and complaint, the party to be brought in by amendment

(A) has received such notice of the institution of action that the party will not be prejudiced in maintaining a defense on the merits, and

(B) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party.

First Credit asserts that the claims against Fayazi and Merkwan do not relate back due to failure of the conditions imposed by Rule 15(c)(3)(A) and (B), notice and mistake. The party seeking amendment must satisfy the requirements of Rule 15(c). Martell v. Trilogy Ltd., 872 F.2d 322, 324 (9th Cir.1989). The requirements for changing parties in the complaint are more stringent than those imposed for changing or adding claims. Compare Fed.R.Civ.P. 15(c)(2) with Fed.R.Civ.P. 15(c)(3). See also Martell, 872 F.2d at 324.

1. Notice

In order for an amendment seeking to add or substitute parties to relate back, the new party must have received notice of the institution of the action within 120 days of the filing of the original complaint. Fed.R.Civ.P. 4(m), 15(c). The purpose of requiring notice is to prevent the new parties from suffering prejudice in maintaining a defense on the merits. Fed.R.Civ.P. 15(c)(3)(A). The Ninth Circuit has provided guidance about what constitutes sufficient notice for purposes of Rule 15. Notice need not be formal, i.e., service of summons and complaint, but it must be sufficient to both provide actual notice of the institution of the action and avoid prejudice to defendants. Korn v. Royal Caribbean Cruise Line, Inc., 724 F.2d 1397, 1401 (9th Cir.1984) (citing Craig v. United States, 413 F.2d 854, 857-8 (9th Cir.), cert. denied, 396 U.S. 987, 90 S.Ct. 483, 24 L.Ed.2d 451 (1969) (Craig I)).

To satisfy the first of these two requirements, actual notice, Plaintiff needs to have given Fayazi and Merkwan notice of the institution of the action within 120 days after the Complaint was filed. Fed. R.Civ.P. 15(c)(3). In Craig I, 413 F.2d at 857-8, the plaintiff was denied leave to amend when the proposed new defendant had knowledge of the incident giving rise to the plaintiff's action but not specific knowledge that the plaintiff had filed suit. The proposed new defendant had conducted an extensive investigation of the incident, but, because the defendant had no notice of the plaintiff's institution of the action, the defendant did not have the required notice. Id.

Although Craig I indicates that a potential defendant must have notice of the filing of the action, other Ninth Circuit cases confirm that this notice may be either actual or constructive. If the proposed new defendants have an identity of interest with the named defendant, notice will be imputed to the former. See Korn, 724 F.2d at 1401. Accord G.F. Co. v. Pan Ocean Shipping Co., Ltd., 23 F.3d 1498 1503 (9th Cir.1994). The Ninth Circuit explains that identity of interest exists when "the parties are so closely related in their business operations or other activities that the institution of an action against one serves to provide notice of the litigation to the other." G.F. Co., 23 F.3d at 1503 (citations omitted). That definition applies to a situation in which notice to a subsidiary is imputed to a parent corporation. In determining whether res judicata bars an action,...

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